Energy: Social Tariff Working Group - terms of reference

Background

Following the ministerial roundtable on energy consumer issues on 12 September 2024, the Scottish Government and stakeholders from across the energy and consumer sectors agreed to convene a group with a specific focus on the issue of a social energy tariff (also referred to as ‘targeted bill support’)

In the early 2000’s, energy suppliers offered social tariffs which were priced to match the cheapest available energy tariffs and usually included support services from suppliers to help consumers lower bills further. Customers who qualified included those aged over 60, people on means-tested benefits, and those living in fuel poverty or on a low income. 

Since then, the regulatory and economic landscape has changed. In 2011, social tariffs were replaced by the Warm Home Discount (WHD) scheme, which targets support at low income households, providing a rebate of £150 every year, and is in statute until 2026. The energy price cap on domestic bills is also now in place and calculated quarterly by Ofgem.

The then Minister for Climate Action wrote to UKG in November last year on a range of matters affecting energy consumers, including the proposed features of a social tariff, based on the work of the vulnerable (priority) consumers working group. The Scottish Government’s position remains that a social tariff should: 

• provide additional support for priority consumers rather than serve as a replacement for existing support measures
• be targeted and applied automatically to those on means-tested benefits and disability benefits
• capture consumers who are narrowly ineligible for benefits, are on low incomes and are either in or at risk of living within fuel poverty
• provide support to vulnerable consumers subject to non-domestic contracts, such as social tenants and people living in park homes
• provide support to high energy users who suffer from long term conditions that necessitate the use of medical or life-saving equipment

Energy prices remain high; based on the recent Ofgem price cap announcement for October to December 2024, we estimate that there will be around 830,000 fuel poor households in Scotland – 32% of all households. This is before analysing any impact of the UK Government’s decision to remove the universal Winter Fuel Payments.

Purpose of the group

It is recognised that the UK Government recently convened a roundtable to consider support for energy consumers this winter; this is welcomed and we look forward to understanding the agreed next steps.  

The purpose of this SG-convened group is to support and inform the potential introduction of a social tariff at a GB level, through the co-design of a deliverable mechanism that enjoys cross-sector support and can demonstrate the viability and positive outcomes of the policy.  

Output from the Group will be shared with the Department for Energy Security and Net Zero and will form the basis of further Ministerial engagement with UK Government counterparts, with a view to encouraging delivery by winter 2025/2026.

Role and remit of the group

Role

Consider and assess the requirements of a social tariff mechanism, including: 

• eligible fuels
• coverage and consumer eligibility
• tariff or discount level
• funding
• delivery options

Remit 

The group will consider the requirements and features of a social tariff as set out above, and the Scottish Government will use any emerging recommendations to inform future engagement with the UK Government on the case for introducing such a tariff. This approach recognises that any decision to mandate and enable a social tariff is reserved to the UK Government.

Membership

The group will be chaired by the Minister for Climate Action, Alasdair Allan, with senior SG officials deputising in his absence.

Membership

• EDF
• EON
• Scottish Power
• Scottish Gas
• OVO 
• Octopus
• Consumer Scotland (CS)
• Advice Direct Scotland (ADS)
• Citizens Advice Scotland (CAS)
• Inclusion Scotland
• The Wise Group
• Scottish Fuel Poverty Advisory Panel 
• British Gas Energy Trust
• Energy Action Scotland (EAS)

Wider engagement 

Further targeted engagement may also be undertaken by the group as required, notably with the following relevant organisations: 

• Ofgem
• Energy UK 
• Fuel Bank Foundation
• Home Energy Scotland (HES)
• Disabled People’s Organisations (DPO’s)
• Social Security Scotland (SSS)
• Public Health Scotland (PHS)
• NHS National Services Scotland (NSS) 

Proposed output and timeline

The group should report on the outcome of its work by no later than the end of March 2025. This should include a written set of recommendations to be made to the Department for Energy Security and Net Zero which makes the case for delivery in time for winter 2025-2026.

Frequency and structure of meetings

• the group will meet on a monthly basis
• the duration of meetings will be no longer than 120 minutes

Communications and reporting arrangements 

• a note including actions will be produced and circulated after each meeting. Minutes will be published on the Scottish Government website.
• a written report will be shared with the Department for Energy Security and Net Zero.